Home Thinking Aloud Changes To Card Payments: What Independent Businesses Need To Know

Changes To Card Payments: What Independent Businesses Need To Know


by Mark Latham, Product and Innovation Director of Handepay 

credit card pay

The Government recently announced that retailers will be banned from charging fees for credit or debit card payments from January 2018. This comes as Visa revealed that it now takes all contactless transactions online as of last month.

Let’s examine what these considerable changes to card payments could mean for the UK’s independent businesses.

Impact on businesses.

Understandably, some companies are concerned that the changes, when combined, will result in financial hardship as they attempt to cover the costs that many card terminal providers charge.

At the other end of the spectrum, others believe that the move will help to re-establish their reputation among consumers, as they’ll have no choice but to stop adding on unpopular extra charges.

In truth, it’s difficult to understand what effect the ruling is likely to have. The good news is that it will finally end a practice that was financially punishing customers for making card payments. Surcharges for paying by card often come as an unwanted surprise in the final stages of a transaction – or worse, cause customers to cancel a payment.

Certain sectors have long been the worst offenders; airlines, concert booking sites and takeaways apps have been known to charge three per cent or more on top of the cost of an item or service. It will be great to see the back of this practice, across the entire community of independent businesses.

The true cost of card processing.

A fresh concern is that independent businesses will now pay more for card processing than they should. It’s vital that card acquirers address this balance, providing the same pricing for both small and large businesses.

However, as of October this year, Visa now takes all contactless transactions online for authorisation.

This means that some card acquirers might subsequently bring in authorisation fees on contactless transactions, even though there’ll be virtually no additional cost at their end. Companies would have no choice but to pay up, meaning higher card processing costs.

Businesses now must find the most cost-effective way to continue accepting card payments.

One option is to raise prices to cover the increasing costs, or stop accepting cards all together. Alternatively, they may choose to absorb the costs themselves. Although this could prove costly, it’s less likely to undo all of the hard work that the independent sector has undertaken to re-establish itself over the past decade.

How businesses can help themselves.

As these two changes are introduced, it’s essential that businesses take the time to understand exactly what they’re getting from their merchant services provider. Retailers need to shop around to see if they’re currently paying too much.

It’s important to look for a provider that doesn’t add hidden fees onto monthly bills, has a transparent pricing structure and offers relevant services, support and equipment.

Some merchant services providers add on a range of extra fees, meaning that costs can be higher than expected. Extra charges to be mindful of include authorisation and joining fees. Fees can also be added to certain types of card payments, such as ‘card not present’ transactions. Many providers even charge for either PCI DSS compliance or non-compliance.

There’s a simple way to find out if your business is overpaying for merchant services.

Find a recent monthly statement, and subtract your monthly terminal rental fee. When you’re just left with your processing costs, divide this amount by your monthly turnover, then multiply by 100.

If you find that your total is above 0.7%, you could benefit by switching to a better deal. To put things into perspective, a business with a monthly turnover of £10,000 should pay no more than £70 each month on card processing costs.

As this is only a rule of thumb, it could differ slightly depending on your business’s average transaction value and blend of credit, debit and commercial cards.


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Mark Latham is the Product and Innovation Director of Handepay, a provider of merchant services to small and medium sized businesses across the UK.